* Biggest daily percentage loss in Brent since February
* EIA reports U.S. crude draw of 2.2 mln bbls for last week
* Analysts forecast 2.3 mln bbls draw, API reported 6.7 mln
* Potential rise in Libyan, Nigerian output also weigh
(Recasts; updates market activity, comments toward settlement)
By Barani Krishnan
NEW YORK, July 7 (Reuters) - Oil prices fell 5 percent to
two-month lows on Thursday after the U.S. government reported a
weekly crude draw within analysts' forecasts that disappointed
market bulls expecting larger declines.
Brent crude also lost the most in a session since February
as the global benchmark and U.S. crude futures broke key
technical support they had defended for nearly two weeks since a
selloff on Britain's shock vote to exit the European Union.
"Once we got past those levels, it was just longs
liquidation all the way," said Tariq Zahir, a trader in crude
spreads at New York's Tyche Capital Advisors.
Oil broke support levels after the Energy Information
Administration (EIA) said crude stockpiles fell 2.2 million
barrels for the week to July 1, just below a 2.3-million barrel
decline forecast by analysts in a Reuters poll. EIA/S
While the EIA reported a seventh weekly decline in crude
stocks, the figure it gave was far less than a 6.7
million-barrel draw cited by trade group the American Petroleum
Institute in preliminary data issued late Wednesday. API/S
"Expectations were high for this report, and they were
dashed," said John Kilduff, partner at New York energy hedge
fund Again Capital.
Brent crude futures LCOc1 settled down $2.40, or 4.9
percent, at $46.40 per barrel. That was the biggest percentage
loss for Brent in a day since Feb. 9.
The session low of $46.15 marked a bottom for Brent since
May 11 and tripped the technical support of $46.69 held since
June 27.
U.S. crude futures CLc1 settled down $2.29, or 4.8
percent, at $45.14. They hit a two-month low of $44.87 earlier,
tripping the June 27 bottom and support of $45.83.
"This opens the door down to $43 on a technical basis," said
David Thompson, executive vice-president at Washington-based
commodities broker Powerhouse.
The CBOE volatility index .OVX , a gauge of options
premiums based on moves in the U.S. oil exchange traded fund
USO , jumped to its highest level in more than four months.
Traders said that indicated sentiment shift in a market that
has traded not far from the psychologically bullish $50 a barrel
level since mid-May despite mixed data on crude.
Oil has risen more than 70 percent from 12-year lows of
around $27 for Brent and $26 for U.S. crude in the first
quarter, driven by unexpected supply outages from Nigeria to
Canada that are now being resolved.
U.S. gasoline inventories also fell less than expected,
slipping by 122,000 barrels according to EIA, versus forecasts
of a 353,000-barrel draw. That added to fears of a gasoline
glut.
U.S. gasoline futures CLc1 hit four-month lows, settling
down 5 percent at $1.3631 per gallon.